UBS to Acquire Credit Suisse, But at a Lower Price

03/20/2023 16:55 • Metaverse Matters • 93 views

According to reports from the Financial Times, people familiar with the matter said UBS had agreed to acquire Credit Suisse and raised its bid to more than $2 billion. UBS will purchase the shares of Credit Suisse at a price of more than 0.5 Swiss francs per share, which is still far below the closing price of 1.86 Swiss francs last Friday. In addition, UBS has agreed to soften the “material adverse change” clause, which stipulates that if UBS’s credit default spreads soar, the transaction will lapse. The material adverse change clause will apply between the signing and completion of the transaction. People familiar with the matter also said that the Swiss authorities have obtained the prior approval of relevant regulatory bodies in the United States and Europe, and it is expected that the United States and Europe will issue a joint statement today. Two people familiar with the matter said UBS would significantly shrink Credit Suisse’s investment banking business, with the combined investment banking business accounting for no more than one-third of the combined group. It is reported that during this negotiation, the negotiators gave the code name Cedar to Credit Suisse and Ulmus to UBS.

People familiar with the matter: UBS is understood to have agreed to acquire Credit Suisse for over US $2 billion

Analysis based on this information:

According to reports from the Financial Times, UBS is set to acquire Credit Suisse at a price of more than $2 billion, but still below the market closing price. The deal was made public recently, and insiders revealed that UBS had softened the “material adverse change” clause, which had caused hesitancy in the negotiations. The clause is a standard contractual clause that allows a buyer to withdraw from the deal if the value of the target company deteriorates significantly between the signing and completion of the transaction. However, in this case, the clause would only apply if UBS’s credit default spreads soar.

The acquisition will significantly reduce Credit Suisse’s investment banking business, which will account for no more than one-third of the combined group. As a result, the two big Swiss banks will give up their rivalry and join forces to focus on wealth management, asset management, and other non-investment banking businesses. Analysts have suggested that this move may be the start of a consolidation trend among European banks, driven by regulatory changes and competition from American banks that have grown bigger and more powerful during the pandemic.

The Swiss authorities have already obtained the prior approval of relevant regulatory bodies in the United States and Europe, and it is expected that the United States and Europe will issue a joint statement today. However, the deal is subject to the endorsement of Credit Suisse shareholders, who will vote on it at an extraordinary general meeting.

The negotiations were conducted with utmost secrecy, and the negotiators used code names to avoid leaking information to outsiders. The codenames Cedar and Ulmus refer to types of trees found in Switzerland, reflecting the Swissness of the two banks. UBS is said to have raised its bid after considering the potential benefits of the acquisition, such as cost synergies and increased market share.

In conclusion, the UBS-Credit Suisse acquisition is a significant move in the European banking sector, with potential implications for other banks looking to consolidate. While the acquisition comes at a lower price than the market closing price, it is still a major development that will reshape the Swiss banking landscape.

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UBS to Acquire Credit Suisse, But at a Lower Price

People familiar with the matter: UBS is understood to have agreed to acquire Credit Suisse for over US $2 billion

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